Friday 31 May 2002 20.09 EDT
First published on Friday 31 May 2002 20.09 EDT

A couple of blocks from Starbucks in Tokyo's Hachiko Square you will find Mandarake, a shop that sells manga comics and anime videos, with their buxom, gun-toting pixies, cute monsters and transforming robots. There is no storefront full of dog-eared publications in plastic sleeves, just a maw of an entrance carved, cave-like, out of fake rock, and flight after flight of stairs down to the basement-level shop. There comic books and videotapes are stacked to the ceiling, alongside the toys and collectibles they inspired. The real esoterica are under glass - rare Godzilla and Ultraman action figures selling for hundreds of pounds each.

With a network of shops across Japan and a listing on the Nikkei Stock Index, Mandarake Incorporated is positioning for global expansion. New stores opened in Los Angeles in 1999 and in Bologna in 2001. Japan accounts for the bulk of Mandarake's revenue, according to company president Masuzo Furukawa, "but in about five to 10 years it should be the other way round. The foreign market should be much bigger."

Already, he says, "there isn't much of a time lag between what sells well in Japan and what sells in the US". The comic characters that fill Mandarake in Hachiko Square show up in MTV graphics, street fashions, bars and dance clubs, even museums. Last year the Getty Centre in Los Angeles opened a blockbuster show dedicated to Japan's "super-flat" movement - art inspired by the two-dimensional look of commercial cartoons.

Sometimes, like an Issey Miyake gown, the Japan that travels is authentic. Sometimes, like cream-cheese-and-salmon sushi, it is not. But cultural accuracy is not the point. What matters is the whiff of Japanese cool.

Critics often reduce the globalisation of culture to either the McDonald's phenomenon or the world music phenomenon. For the McDonald's camp, globalisation is the process of large American corporations overwhelming foreign markets and getting local consumers addicted to special sauce. In this case, culture flows from American power, and American supply creates demand. For the world music camp, globalisation means that fresh, marginal culture reaches consumers in the US through increased contact with the rest of the world. Here too, culture flows from American power, with demand from rich Americans expanding distribution for Latin pop or Irish folk songs.

But Japanese culture has transcended US demand or approval. Director and actor Takeshi Kitano, arguably the Japanese film industry's most noteworthy recent export, was embraced first in Europe, then in the US. At this year's Berlin film festival, Hayao Miyazaki's Spirited Away became the first animation feature ever to win a top festival prize. The UK last year hosted Japan 2001, a year-long cultural festival in venues from the Shetlands to Penzance. And the "J pop" (Japan pop) singer Namie Amuro has built a huge fan base in Asia without ever going on tour in the US.

Millions of teenagers in Hong Kong, Seoul and Bangkok covet the latest fashions from Tokyo, most of which never make it to New York. Japanese lifestyle magazines - some of the most lavishly produced in the world - are smuggled by illegal distributors across Asia as soon as they are on newsstands in Tokyo, though none has launched an American edition.

At the same time, Japan has made deep inroads into American culture, usually written off by the rest of the world as aggravatingly insular. Bestselling Sony Play Station and Nintendo video games draw heavily on Japanese anime and manga for inspiration. So have recent Hollywood films such as The Matrix and television series, including James Cameron's Dark Angel .

"Tokyo is the real international capital of fashion," the style editor of the New York Times proposed this spring, spurning Paris, New York and Milan. Japanese anime-style cartoons currently fill the majority of time slots in the after-school and Saturday morning schedules on US cable television. The Pokémon cartoon and video game franchise is broadcast in 65 countries and translated into more than 30 languages.

Back in the 1980s Japan pioneered a new kind of superpower. The country had no army to speak of, no puppet regimes to prop up, no proxy wars to mind - just an economy. What made it a superpower, more than just a wealthy country, was the way its great firms staked claim to an intellectual high ground that left foreign competitors scrambling to reverse-engineer Japanese successes. The key to the country's ascendance was not ideology - at least not by cold war standards - but it was a method, it drove the most dynamic economy of the era, and it was indisputably Japanese.

It is a long time since Japan could be called an economic superpower. The swagger is gone, a casualty of a decade-long recession. Gross domestic product is down; the yen is down; the Nikkei Stock Index last year hit a 17-year low; and full employment has been replaced by near-record rates of joblessness. Yet there is more than one way to be a superpower. From pop music to consumer electronics, architecture to fashion and food to art, Japan has a far greater cultural influence now than it did in the 1980s.

Japan's cultural sway is not quite like that of America's abroad, which, even in its basest forms, tends to reflect certain common values - at the very least, US-style capitalism and individualism. Contemporary Japanese culture outside Japan can seem shallow by comparison. Or it can reflect the contradictory values of a nation in flux, a superficiality that prompted the Japanese art magazine BT to equate contemporary Japanese culture with super-flat art, "devoid of perspective and devoid of hierarchy, all existing equally and simultaneously". "We don't have any religion," painter Takashi Murakami remarked, a bit more cynically. "We just need the big power of entertainment."

But gradually, over the course of an otherwise dismal decade, Japan has been perfecting the art of transmitting certain kinds of mass culture - a technique that has contributed mightily to the American hegemony around the world. If Japan sorts out its economic mess and military angst, and if younger Japanese become secure in asserting their own values and traditions, Tokyo can regain the role it briefly assumed at the turn of the 19th century, when it sought simultaneously to engage the west and to become a military and cultural power on its own terms.

I spent three months last year travelling around Japan, talking to artists, directors, scientists, designers and cultural pundits. Many of them seemed surprised at the idea of Japanese cultural might abroad. They tended to think very little about foreign audiences. What they talked about instead was foreign inspiration. At times, it seems almost a strange point of pride, a kind of one-downmanship, to argue just how little Japan there is in modern Japan. Ironically, that may be a key to the spread of Japanese cool.

"I can't always distinguish elements of traditional Japanese culture from Japanese culture invented for tourists," confessed Toshiya Ueno, a professor of sociology at Chubu University and, in his spare time, a techno DJ who has played Tokyo and Amsterdam. "During the first world war, in Japan, already there was a strong argument about overcoming modernity," Ueno said, sitting in his cluttered office behind two turntables and a mixing board. "Already, postmodern eclecticism was surfacing." In other words, Japan was post modern before postmodernism was trendy, fusing elements of other national cultures into one almost coherent whole. It makes sense: Japan's history is filled with examples of foreign inspiration and cultural fusion, from its kanji character system to its ramen noodles.

Nowhere is this fusion more evident than in Japan's greatest pop icon, Hello Kitty. Sanrio Company's cartoon cat drives an empire worth almost $1bn in global sales per year; Asian-American pop culture magazine Giant Robot proclaimed her the best "corporate whore" of 2001. Sanrio licenses so many products with Hello Kitty's likeness that a spokesman could only give an estimate: 12,000. You can buy individually wrapped Hello Kitty prunes. You can buy a toaster that burns Hello Kitty's face into a piece of bread. You can even buy a Hello Kitty vibrator.

"We don't have such strict regulations," the spokesman said. "Hard alcohol - maybe that would not be appropriate."

Teenagers and twentysomethings in the US and elsewhere buy Hello Kitty purses and mobile phone covers as icons of Tokyo pop chic. Yet Kitty speaks English and her official magazine recently revealed that her surname is the very un-Japanese White. I asked Hello Kitty's longtime designer whether Kitty is foreign or Japanese. "When Kitty-chan was born, it was very rare for Japanese people to go abroad," Yuko Yamaguchi replied. "So people yearned for products with English associations. There was an idea that if Kitty-chan spoke English, she would be very fashionable."

That didn't really answer the question. "Kitty has a sort of independent existence," Yamaguchi hedged.

A cultural superpower needs a healthy economic base but not necessarily a healthy economy. Perversely, recession may have boosted Japan's national cool, discrediting Japan's rigid social hierarchy and empowering young entrepreneurs. It may also have loosened the grip that the big-business career track had on Japan's workforce, whose members are now less likely to be stigmatised for experimenting with art, music, or any number of similar risky endeavors. "There's a new creativeness here because there's less money," said Tokyo-based architect Mark Dytham, a London transplant. "Good art is appearing - young, strong art. Young fashion is appearing."

Graphic designer Michael Frank, who shares a flourishing studio with Dytham, agreed: "A lot of interesting smaller magazines appeared in the past four or five years. A lot of small businesses - people running their own shops, people running their own music labels, people running their own clubs. Bigger companies are starting to pick up on those little things and support them."

Meanwhile, a constellation of factors distinct from the economy and its woes have kept yen flowing to the pop industries and the other cultural media that Japan projects so effectively around the world: demographics that favour young people and their whims, a reliable demand for luxury goods, and a reputation for cutting-edge technology.

Decades of declining birthrates have filled Tokyo with one-child families, and in scarcity there is power. Not political power - not yet, anyway - but consumer power, and lots of it. "Children sense that they are rare," said Mariko Kuno Fujiwara, of the Hakuhodo Institute of Life and Living. And so they tend to be spoiled. Fujiwara recalled one newspaper headline - Our Children Kings - with a laugh.

Tokyo's young people spend an average of $150 a month on mobile phone bills alone. They propel a dizzying turnover in street fashion. They drive one of the largest music industries in the world, second only to that of the US. At a branch of HMV in the Ginza district one afternoon, I counted more than 100 people queueing at the tills, and not one looked over 30. Japanese firms have strong financial incentives to satisfy the demands of a generation with high disposable incomes, regardless of economic ups and downs.

Luxury goods have also fared well in Japan's slack economy. Local consumers haven't stopped buying high-end products, as a number of sociologists I spoke to stressed. They simply save up longer for them. So even as the economy languishes, rush hour in Tokyo is like a luxury-car show. Sony electronics are also frequently more expensive in Japan than abroad, one of the company's designers explained, because Japanese consumers strongly prefer lighter materials and sleeker designs, even if they cost more. A sliver of a MiniDisc player in pumpkin orange and lime green, a narrow mobile phone with a big colour screen for internet services, a tiny MP3 personal stereo that clips directly in your ear - these are goods that inspire technolust in the most level heads, Japanese or foreign.

Most foreigners will never penetrate the barriers of language and culture well enough to see Japan as the average Japanese sees it. But that is part of Japan's secret to thriving amid globalisation. There exists a Japan for the Japanese and a Japan for the rest of the world. Often - in the case of youth fads, for instance - there is a good deal of overlap. Sometimes, in the case of sumo wrestling or the layout of a typical suburban house or the variety shows that proliferate across Japanese television, there is none.

More than 60 years ago, in his classic study Mirror, Sword and Jewel , the German economist Kurt Singer discussed the contrast between the "plasticity" and "endurance" of Japanese culture - the ability to absorb and adapt foreign influences while retaining an intact cultural core. For Singer, writing in the 1930s, the question was "why this gifted and active nation has produced so little that has been found acceptable by other countries in an age open to all foreign influences".

Today Japan has outgrown that question, thanks largely to the qualities of Japanese culture that Singer himself identified. In cultural terms at least, Japan has become one of a handful of perfect globalisation nations. It has succeeded not only in balancing a flexible, absorptive, crowd-pleasing, shared culture with a more private, domestic one but also in taking advantage of that balance to build an increasingly powerful global commercial force. Japan is cool, and cool sells.

· This is an edited extract from the May/June issue of Foreign Policy magazine. Read a full version of the article on Guardian Unlimited Arts.